Get Fed

Wayne Dadetto began his business in 2001 with little more than an idea. After 22 years in the U.S. Army Special Forces, he knew soldiers wanted a way to make reconnaissance tools work together, and he wanted to provide it. He started reselling battery adapters and similar products and has since taken his Fayetteville, North Carolina, firm, Tactical Support Equipment, from his garage to 15 employees and $37 million in sales last year--all thanks to the U.S. government. "I had a vision," says Dadetto, 46. "And so far, my vision has come true."

No matter how big your startup vision is, selling to the government can accommodate it. The federal government spends more than $400 billion a year on contracting, says Scott Stanberry, author of Federal Contracting Made Easy. "We're talking about the world's biggest customer," Stanberry says. "Nobody else is even close."

And that's just the federal government. "There are 86,000 'governments' in the U.S.," says consultant Mark Amtower, who helps businesses market to the government. That list includes 35,000 municipalities, 3,000 counties, 14,000 school districts, 16,000 special districts and 512 American Indian tribes, all of which are taxing entities and have tax dollars to spend, Amtower says.

The diversity of the opportunity matches its scope. That treasure-trove of federal contracting dollars was spread over 11.5 million different contracts last year, says John DiGiacomo, program director at the Rock Valley College Procurement Technical Assistance Center, one of nearly 100 federally backed centers nationwide that help businesses market to the government. From federal to local, government buyers purchased about 14 million different contracts, covering nearly every conceivable product and service.

Structurally, this market is set up to welcome small businesses. The majority of federal contracts--approximately 95 percent, says DiGiacomo--are between $2,500 and $100,000. Those contracts are targeted at small businesses due to federal guidelines requiring the government to assist small firms.

Overall, the federal government aims to spend 23 percent of its contracting dollars with small firms. While few agencies actually meet that goal, there is a new push in Washington to get small businesses their share of federal spending. Says Amtower, "You'll see more activity on the side of federal agencies offering new ways for small businesses to participate."

The federal government also mandates favorable treatment of firms owned by women, minorities, veterans and disabled veterans, as well as businesses in historically underutilized business zones, or HUBZones, and other economically disadvantaged areas. "Your size and who owns you--which wouldn't have an effect in the commercial world--can give you a huge advantage in government contracting," says Stanberry. Reliability is another attractive feature of selling to the government. The credit risk for a government customer is close to zero. "The government always pays if you do what you're supposed to do," Stanberry says.

In many cases, the government pays as quickly as or more quickly than commercial clients. "By law, the federal government pays in 30 days, and in many cases, it's by electronic funds transfer," says DiGiacomo. "That means you get paid [almost] instantly."

Government customers can also provide the long-term stability that commercial businesses need to balance out the ebb and flow. "The government never spends less," Amtower says. "It's recession-proof."

Getting Started
Government contracting is an option for many more small businesses than those that currently participate. But selling to the government isn't like selling to commercial customers, and it takes time and effort to equip your business.

Any startup entrepreneur who begins looking into government contracting will soon hear lots of advice about how to get started--much of it very different or even contradictory. That's as it should be, says Stanberry, because a market this vast has many ports of entry. "There is no one way to market your goods and services to the government," he says. "There are lots and lots of ways."

Some basic first steps are common to almost all approaches. For instance, businesses should register at the Central Contractor Registration website (ccr.gov), the primary contractor database for the federal government. To do this, you will need a Dun & Bradstreet, or DUNS, number as well as a North American Industry Classification System, or NAICS, code. You'll also want to check out the SBA's "Size Standards" web page to see if your company qualifies for small-business status as defined by the SBA. A lesser-known fact: Your company must also have a computer and an internet hookup, and be computer literate. "If you don't have a computer and broadband connection, and you don't know how to use your computer, you have no business doing business with the government," says DiGiacomo. "That's the bare minimum." One reason it's critical to be up to speed with IT is that the federal government requires invoices to be submitted electronically. Another is that virtually all information about government contracting, including solicitations and reams of helpful how-tos, is now primarily distributed electronically.

Next, look within your company and yourself. "What is it you sell? What do you do best?" asks DiGiacomo. "That's what you need to decide. Then start taking a look at federal, state and local governments and prime contractors, and see what's the best fit for you."

What the Government WantsA good first stop in your effort to find out what the government wants is FedBizOpps (fbo.gov), where you can see all the federal procurement opportunities over $25,000. Type the name of your offering in the search bar and see what turns up. But make sure you search for an item and not a process. "If you make nuts, [search for] 'nuts,'" DiGiacomo explains. "Don't [search for] 'milling' or 'boring.'"

One of your goals in performing a search is to identify the codes that describe the product or service you selling. You'll also get a feel for how the government buys things and whether there's much demand for your product at all. If you see some good opportunities, your next step is to search for help in fine-tuning your approach. Luckily, there's plenty of help available.

Nearly every state has a Procurement Technical Assistance Center, or PTAC, usually associated with a community college or other educational institution and always staffed with experts experienced in helping businesses tap into government opportunities. These centers are excellent places to find help once you've identified one or more solicitations that interest you. "You can go to your local PTAC, get online, download the spec and have it in your hands in a matter of minutes," says DiGiacomo.

Specifications can run anywhere from one to 40-plus pages, and DiGiacomo recommends that you read every page carefully. And remember, just because you think you can provide something at a competitive price doesn't mean you should submit a bid. "Price could be the last thing [that particular government agency] is looking for," says DiGiacomo. Delivery times, packaging and other features may be equally or more critical for landing a given government deal. Defense-related contracts in particular may have shipping and packaging requirements that cost more than the item itself. Says DiGiacomo, "The biggest mistake most people make is that they don't read the contract."

Making It EasierThere is a lot you can do to make your foray into government contracting easier. One of the most important steps for federal contractors is to obtain a General Services Administration contract, known as a GSA Schedule, which allows you to sell to all government agencies with less hassle. Dadetto, who spent several years selling to government buyers before getting his GSA Schedule last year, says having it is a significant help. "Every time we tell [the government buyer] that they can buy through GSA, we hear a sigh of relief," he says.
Getting a GSA Schedule can be difficult, time-consuming and costly, especially if you hire a government marketing consultant to do the job for you. Several months and an outlay of $5,000 to $10,000 is common, Amtower says. However, you can get no-cost help from sources like your local PTAC or SCORE office.

One way to greatly reduce the confusion is to partner with a prime contractor. Larger companies with experience in contracting can shield you from much of the complexity involved in working with the government. And because prime contractors are also under mandates requiring them to spend a percentage of their contract revenue with small businesses, entrepreneurs often find a warm welcome from them. Says DiGiacomo, "With a prime contractor, you don't have to jump through 100 percent of the hoops." Experienced small-business government contractors say the real face of government contracting is a human one, not a computer screen or printout of confusing jargon. Although an increasing number of contracts are automatically evaluated and awarded by computers (DiGiacomo says those contracts are identified by the letter "T" in the solicitation), even those opportunities can be enhanced by contacting the contracting officer for clarification, amplification or just to touch base.

Only about half the federal government's spending comes directly from Washington, DC, Amtower says. The other half flows through 37,000 occupied federal sites around the country, plus many more military bases and post offices. Several government groups, such as Veterans Administration hospitals, are large purchasers of a wide variety of locally produced goods and services. In other words, says Amtower, "You don't have to be there to play."

Good GovernmentThe competition for contracts can be fierce, and the mishmash of rules and jargon don't make it any easier. The year 2002 was a slow time for Dadetto due to preparations for the war in Iraq. "The military was so focused on going to war that nobody was focusing on buying anything," he says. "What they had was what they were going to fight with." While the government may rarely, if ever, slacken, there is an ebb and flow to procurements from specific government customers. For instance, Dadetto was able to shift his company's attention to other branches of the government that were growing. Government contracting may not be for every small business. Buyers want to buy from firms with a dem-onstrated ability to reliably provide the products or services they need. That can be challenging for startups, says Stanberry, but you can get around it by showing you have experience in the field and the systems to handle the accounting, logistics and other demands.
Overall, the size, stability and diversity of government contracting make it so attractive that it's something few companies can afford to ignore. "When you're starting out, it might be a little intimidating," says Stanberry. "But that shouldn't stop [you]."

Mark Henricks writes on business and technology for leading publications and is author of Not Just a Living.